Fundamental Principles for Doing Business in China

With the arrival of the global village and the information era, transnational businesses became increasingly frequent. China's 26 years of reform not only injected vitality into its economy but also brought boundless business opportunities for overseas businessmen. The objectives are to seize business opportunities and to minimize the risks in doing business in China.  Understanding aspects of the Chinese business culture is essential to meeting those goals, and the following are three basic business principles in China.

In China's marketplace, the sales force plays a crucial role and remains one of the most important marketing tools.  Although online shopping is gaining popularity in China, it is not as prevalent as in the United States.  As reported by the Internet World Statistics, the number of internet users in China grew 346.7% from 2000-2005.  By June 30, 2006, there were more than 144,301,513 internet users in China, which accounts for 13.8% of the total number of internet users in the world.  As more Chinese people embrace the internet, online shopping will eventually gain in popularity.  As for the time being, most Chinese still prefer to go shopping together with their friends and family on the weekends or after work.  They do this to find the best prices and to alleviate pressure from work accumulated over the week.  Since most sales are made "face to face", salespeople are the key to selling goods and services in China.  The salespeople not only present the merchandise to the consumers but also ensure that customers receive accurate information about products at the appropriate time.  Typically, salespeople will employ the use of aggressive "in your face" sales methods to close a deal. 

For example, there are many computer stores that display an abundance of computer brands or models inside the Dalijia Computer Mart of Fuzhou in Fujian province.  If a store wants to occupy a dominant position within the market, it must rely on its salespeople. Usually customers will estimate the value of computers based on the introduction made by salespeople and then proceed to make up their minds for purchases to be made.

Even in other businesses, salespeople continue to play the same role. Fashion boutiques in Fujian will play loud and upbeat music to attract teenage customers; salespeople will stand by the doors to encourage customers to come inside the store to at least see what is offered. Quite often, one salesperson will entirely dedicate himself or herself to attend to a single customer. They will not only attempt to befriend the customers but also give insights on what is now the popular trend in fashion. Lastly, the salesperson will usually offer a discount to seal the deal.

The second principle is based on personal relationship, which remains the key component to succeeding in China .  As Andrew Carnegie, the United States educator and successful entrepreneur, once noted, "[o]ne person's success relies 15 percent on his expertise and 85 percent on his personal relationships and social skills."  Personal relationship is psychological and social contact formed in the process of mutual interaction among people. It is both direct and indirect interactions that can be perceived among people and restricted by people' psychological characteristics.  For businesses in China, personal relationship ensures success.  Knowing the right people will lead one to a path of great success.

Personal relationship extends to all areas of a business, including hiring, purchasing, and getting business. These informal referrals serve as an effective means to sourcing goods and services for businesses.  For example, most hiring in China is done through referrals from personal acquaintances.  When purchasing equipment and supplies, companies avoid wasting inordinate amounts of time to research various products and to bargain for the best prices by simply getting a referral from a friend. This reduces the chance of purchasing poor quality goods. In the service area, knowing the right people becomes even more important. For instance, if you are experiencing connection failures and need to get your internet connection repaired quickly, you need to know someone who can get it done. Otherwise, you will found yourself in a pool of excuses of why a service person has yet to attend to your situation nicely. 

Lastly, it appears that in the Chinese marketplace almost all goods and services are treated as a commodity. Prices are determined freely in the marketplace so that consumers can determine the cost of their purchases amongst several stores, similar to the concept of ebay. Ebay started as what was an online garage sale between internet users. Today, both home internet users and business stores use ebay for transaction of goods.  Ebay has expanded to such effectiveness that allows its consumers find the best prices for goods and services. The Chinese accustomed method of shopping is bargaining in the store until you get the best price. It is especially ineffective if you are shy of using your bargaining skills. In fact, shopping may become a hassle if you do not bargain because you will be cheated of your money. Regardless of what the final price is, it is essential to the Chinese people that you bargain before you decide to purchase.   In China, there is a saying that states that if you are paying more than half of the original price, you are paying too much. For example, an US company starting a new office in China was more than willing to sign on with a large telecommunication company in Fujian, China for a fiber optic line for 2000RMB per month.  After speaking to a local contact, the US company obtained the same internet connection for only 600RMB per month.  Of course, the reduction in price came after several heated price negotiation sessions with many salespeople from different telecommunication companies. This bargaining culture has even been brought over from China to the United States and is most evident in the markets in Chinatown.    

In short, success in china depends on your appreciation and acceptance of the Chinese culture. As the Chinese old saying goes, "Knowing yourself and your opponent well will be beneficial to you."  If foreign companies are able to understand the gist of Chinese business culture, they should be able to easily adapt to the new business environment in China.